Big = Great. Big = Strong. Big = Safe. Big = Good quality. At least that's what the big banks and investment managers seem to believe - and want you to as well.
Pick up one of their product brochures and more often than not the first and most prominent message inside is, “We are big, we are global, we must know what we are doing : give us your money”. The investment proposition is almost secondary.
Understandably, people might give some credence to these assertions. Big banks and investment managers have resources, infrastructure, skills, etc. And exceptional brand presence. But, in practice, in reality, there’s more than whiff of myth behind all of this : but with unstoppable momentum.
So why isn’t big necessarily beautiful. Most importantly, why doesn’t big brand necessarily = good quality products? Let me illustrate this by looking at another industry – restaurants.
McDonalds is one of the most amazing (at least to my standards and especially when I have a hangover) global giants. But, take a look at the description of the company on Bloomberg and it doesn’t get much simpler: "McDonald's Corporation operates and franchises fast-food restaurants worldwide. The company franchised fast food restaurants offer a variety of hamburgers and side dishes such as French fries."
Wow! So, it's a company that relies mainly on hamburgers and French fries. And yet they have managed to grow globally, across all economic climates.
You walk into a McDonalds because you want a hamburger, and you want one quickly. You find standard products, like Big Macs, in virtually every McDonalds in the world. And, because McDonalds has set up procedures and processes, these standard products are consistent (in terms of taste and packaging) across all franchises globally. And they taste ok – they’re certainly eatable (and especially if you have a hangover). But, as we all know, these products are also produced cost-effectively and fast, in fact within minutes. Why? Because that’s the brand. And the brand = sales. In fact, it is it’s more important than the product, ie whether the burger really tastes good.
As I’ve said, many banks and fund managers are big. They are empires. And their brands are sacrosanct (try stamping Goldman Sachs on your village football team club shirts and see how long it takes for a lawyer to turn up!).
To extract economies of scale they need to manage their products like McDonalds. And that means products have to be ‘scalable’ and ‘replicable’.... more than they need to ‘taste good’ or be brilliant.
Actually, we think the bigger the institution, and the more customers it owns, the more likely you are to see mediocre products from them, in their own channels, largely because they need to ‘optimise across the empire’. And the holy grail ? A product that sells, that they can sell everywhere, to everyone, again and again ... just like Big Macs.
But, whilst McDonalds concentrates on fast food, discerning diners get out their Michelin guides and look for quality. They want a la carte menus, with choice. They want culinary delights, specially prepared by chefs with Michelin stars. Healthy satisfaction, and an experience to treasure, remember and extol the virtues of to friends and family.
Think of it in terms of investment products. Too much of the industry wants to treat investors as kids, (and hung over adults), who love Big Macs (and the toys that come with them).
Blue Sky Asset Management's mission is to help IFAs address the “adult” needs of fine dining investors – investors who want wealth preservation and wealth creation, absolute returns, real alpha and better beta. Portfolio planning and investments ... not bland products and gimmicks.
In a nutshell, we think the industry needs intelligent and smart investments. And that for this you need specialists - like us. Firms that are highly experienced, smart and knowledgeable, with the capabilities to match the skills of the big firms, but the flexibility and commitment to utilise these skills to meet the interests and needs of intelligent advisers and investors. A la carte fine dining, not bland fast food.
Think of Blue Sky Asset Management in terms of the Gordon Ramsay of structured investments. Okay, fewer f-words, but renowned for real skills and creativity, passion and delivery. Investments not products, truly at the top of the game, and trying to make a difference.
Talk to us – and you will get a taste of specially sourced foie gras, rather than the standard Big Mac.
P.S. Not all food critics/investment commentators can tell the difference between Big Mac-like products from large providers and fois gras from a specialist. Sometimes you have to taste the difference for yourself. And for anyone that likes to live on fast food? Think of that poor chap in "Supersize me", who lived on Big Macs every meal every day, until he couldn’t.
Dr James Chu is managing director and chief investment officer at Blue Sky Asset ManagementIFAonline
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